The Hindu Business Line : More foreign banks keen to open offices here

More in the pipeline
Large banks such as Barclays and Deutsche have became active again recently.
Many foreign delegations arrive to explore possibilities of setting up operations

Priya Nair

Mumbai, Feb. 12 Anticipating opportunities in India after 2009, foreign banks are queuing up to open offices in India.

Two foreign banks have recently announced their plans to start operations here. Royal Bank of Canada, the largest bank in Canada, inaugurated its representative office in Mumbai on February 1. It will provide capital market products, wealth management, correspondent banking and trade finance services.

On February 6, Glitnir, the Northern European bank headquartered in Iceland, also announced that it would be filing applications with the Reserve Bank of India to open a representative office here. For now, it has formed a joint venture with LNJ Bhilwara Group to develop geothermal power plants in India and Nepal. A Swiss delegation also visited the Indian Banks’ Association office in Mumbai on February 11, to explore the possibilities of setting up operations in India.

An official from the IBA said, “We have been getting foreign delegations, at a rate of about one in two months, ever since the roadmap for foreign banks was released in 2005. We have had delegations from Switzerland, Russia, South Africa and neighbouring countries such as Nepal and Sri Lanka.”

The official also said that foreign banks in India are keen on expanding their operations. All this is in readiness for 2009, when the banking sector will be opened up, he said.

The RBI, in its roadmap for foreign banks in India, had suggested that it would liberalise the banking sector after March 2009.

In the first phase between March 2005 and 2009, foreign banks would be allowed to establish a wholly owned subsidiary or convert existing branches into a subsidiary. They would also be eligible to acquire stake in Indian private sector banks identified by the RBI for restructuring.

The roadmap had also stated that the RBI would consider treating the wholly-owned subsidiaries of foreign banks in India in a similar manner as Indian banks, with a stipulation to list on Indian exchanges.

Active again

According to Mr Tarun Bhatia, Head, Financial Sector Ratings, Crisil, foreign banks are looking at India very strongly. He cited examples of larger banks such as Barclays and Deutsche, which became active again, recently.

“Foreign banks can’t escape emerging markets such as India and China, which are on their radar, whether March’09 happens or not. They are continuously in talks with the RBI for licensing or taking the NBFC route for expansion,” Mr Bhatia said.

Mr S. Krishnamoorthy, Chief Representative of Zurcher Kantonalbank, which opened its representative office in India last year, said, “We are not looking to expanding operations for the moment, but a lot of foreign banks are looking at India closely and many have got approvals to set up rep offices.”

However, he said that with the recent sub-prime crisis, many of these banks are facing difficulties in their home countries and may be trying to recoup resources.

But, according to Mr Bhatia, the sub-prime crisis may only lead to a scaling down of operations and foreign banks would not lose interest in India. Despite the RBI allowing only 11 or 12 branches in a year,, foreign banks are targeting growth through the NBFC route in any case, he pointed out.

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